Wednesday, June 18, 2008

Really now, what exactly is a "No Fee" Rental?

This is the hot topic in town these days. Everyone wants to get a great apartment in a hip area and avoid paying a fee. Trust me when I tell you, the old adage is true. In this city, you really do get what you pay for.

Allow me to explain, on a $3000 per month 1 BR apartment, the standard %15 of the first year's rent broker's fee equals $5400. Your total out of pocket at lease signing, provided the landlord only wants one month rent and one month of security, works out to $11,400. That's a lot of coin for most people. Let's examine this further.

The broker's fee is a lump sum, one time payment. Most people for whatever reason, look at this like it's added to the monthly rent. So let's divide the $5400 by twelve if you are doing a one year lease (most do this even when it's a two year lease). That means that $450 is added to the monthly rent in the typical renter's mind.

Let's look deeper still. The number of places out there where you can find a decent $3000 1BR in a hip area on your own, are few and far between. I'm not just saying this because I'm a broker, look at the facts. Related Rentals is a large management company with buildings in the best locations around the city. All buildings are first class with every amenity down to a doggie spa at one new building. The Alcove Studios at 1 Union Square South are STARTING at $3995 with 1BR's starting at $6095!

Comparable condominium buildings in the same exact area of Union Square right across the street, that you can only get through a broker, are offering rentals from $2800 for a straight studio, $3400 for an alcove studio and from $3700-$4500 for a true one bedroom.

Do the math, if you pay a higher monthly rent and rent from the building without a broker, are you really saving any money? If you pay a broker fee and can find the same apartment for roughly half of the monthly price aren't you really saving then?

Buildings that you can rent on your own, have to pay the on site leasing staff, pay their advertising budgets for New York Times, web sites and craigslist and pay the management staff as well. They are not going to pay that themselves, thus higher monthly rents are passed onto you, the tenants. This has caused them to suffer a bit right now. How many people can afford a $4000 alcove studio?

I have noticed that these buidlings, which NEVER offered one month of rent towards the broker's fee, are doing it all across the board right now to increase the volume of rentals. Normally during this time of year, the apartments rent in a day on their own. Now the buildings are offering this incintive to get as many people in thier showing the units. The more that see, the more likely they will rent in less time.

At the end of the day, if you can afford a $7000 one bedroom, you probably have all day to window shop and explore the city and deal with the hassle of it all so you don't need a broker. If you are not in that first category, then you probably will try at it on your own and there is a 75% chance that you will still wind up using a broker because you still have to work. The only true no fee rental is from an owner or landlord directly, and even then, they usuall still charge higher monthly rents.

There is a reason that we are here even with all of the changes in the market place. A good broker will save you time and money over the long run. That's why we make the big bucks. In this city, time IS money!

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